Apple TV: a Content Device Needs Content

Content businesses use technology, but are not fundamentally about technology. Back in the days of analog television, three decades ago, a couple of delivery systems, such as laser discs, provided much-better image quality. Laser disc lost out in the market to VCRs, which offered visibly-worse image quality.

But there were two distinct advantages: lower device cost and much-greater content selection. All other things being equal, consumers will tend to choose wide content choices over video quality, and lower-cost devices over higher-cost devices.

But all would-be video providers have to convince content owners to license content. And that will remain a key challenge for any would-be developers of new TVs and video playback and purchasing systems.

An Apple television foray makes sense. People could use any Apple device to buy TV shows, movies, music or games through iTunes and then play their purchases across all Apple's products.

But, so far, it does not appear that Apple has been notably successful at convincing content owners to license TV programming for sale through iTunes. Apple television

9% of U.S. Consumers Have Abandoned Video Service

About nine percent of U.S. respondents to a Deloitte survey say they have stopped buying video entertainment subscriptions from cable, telco or satellite providers, while another 11 percent report they are considering doing so.

Perhaps the important finding is why people are considering doing so. The 11 percent who report they are considering abandoning subscription TV services say they now can watch almost all of their favorite shows online.

One would guess that, as typically is the case when product substitution occurs, that the first “switchers” are users for whom the existing solutions have low value, compared to product price.

The classic example is the person who doesn’t watch much television in the first place and does not have children or other family members who do enjoy television, making a $100 a month fee “high” in relationship to value.

In the case of the "typical end user," video cord cutting seems to be more of a barrier than some might think. Highly-motivated end users might put up with quite a lot of hassle to avoid buying video. For most, such efforts will be too much bother. 9% of U.S. Consumers Have Abandoned Video Service - Carrier Evolution

Mobile Payments, Commerce Big in 2012?

There's an unusual finding in Chetan Sharma's most-recent survey of 150 mobile service provider and suppler executives looking at what will be hot in mobile in 2012. The respondents believe mobile payments and mobile commerce will be more popular consumer applications than location services and music, and will be only modestly less popular than messaging.

That is almost shocking. The only way to make sense of the findings is that "commerce" is broadly defined to include checking product availability and prices from a mobile, browsing shopping sites on a mobile device, or looking for a particular store.

The clue is that there appear to have been separate questions asked about use of near field communications, for example. Still, the fact that mobile payments and mobile commerce are considered the second most popular consumer application of 2012 is instructive, even if most observers might agree that the bulk of that activity will take the form of commerce rather than payments.

The other noteworthy finding is that many of the executives expect Amazon will enter the mobile market in a more-direct way in 2012. Mobile executives views on 2012

Western Europe Mobile Churn Will Grow in 2012

Mobile customer churn will increase in many European Union markets in 2012, analysts at Yankee Group now predict. “Value” is expected to be a key driver for much of that churn, one might conclude, with potential winners among the ranks of service providers with a “value” orientation.

During 2012, several European Union countries will slide into recession and governments will press ahead with tough austerity measures, Yankee Group believes. The most affected countries will include Greece, Italy, Spain, Portugal and Ireland, but others, including the U.K. and France, will also be impacted.

“As they did during the last recession, customers will optimize their mobile consumption behavior in an attempt to minimize monthly spend,” say Yankee Group researchers.

During the first year of the recession between the fourth quarter of 2008 and the fourth quarter of 2009, monthly churn increased by 0.14 percentage points. That might not sound like much, but leads to about a 17-percent increase in churn rate over a year’s time.

During 2012, similar switching behavior will contribute to another increase in churn rates. Western Europe Mobile Churn Will Grow in 2012 - Carrier Evolution

Lower Mobile ARPU in Latin America

The current strategy used by virtually all mobile service providers to combat declining voice average revenue per user is increased data revenue. So far data revenue growth has slowed the decline of blended ARPU, but it hasn’t stopped the bleeding entirely, in South American markets.

Excluding Venezuela and Argentina, voice ARPU in Latin American markets are declining at about two percent per quarter, according to Yankee Group analysts.

“Simple linear projections indicate nominal voice ARPU won’t stop declining until late 2017,” Yankee Group says. “By then regional voice ARPU would be just over U.S.$5.80, about 40 percent less than it is today.” Lower Mobile ARPU in Latin America - Carrier Evolution

"Voice as a Feature" is Business Customer Future

For the last decade and a half, at least, communication applications increasingly have been decoupled from network access and also are starting to be available across a range of devices used by a single person.

Another way of saying that is to note that “application-specific networks,” built to deliver a single lead application, no longer are the norm. Instead, virtually all major networks now are “multi-service” networks.

In some ways that has helped service providers, who now can sell multiple anchor products on a single network (voice, video and data). On the other hand, modern networks also fundamentally separate “access” from “applications,” meaning “over the top” competition now is easy.

That of course also has the added danger of removing service providers from direct customer relationships on a wider range of products, services and experiences.

According to analysts at the Ericsson Consumer Lab, traditional communication verticals such as telephony and video conferencing will continue to exist as profitable businesses. "Voice as a Feature" is Business Customer Future - Carrier Evolution

Broadband is Cable's New Anchor Service

Many have been making the argument that all fixed line networks will be foundationally based on broadband access services in the future. Recently even some cable TV executives have been saying that is the case. Recent U.S. cable operator revenue growth figures suggest the trend is well underway.

That is not to dismiss the importance of the legacy video revenue, any more than it makes sense to dismiss the continuing importance of voice revenues for mobile or fixed network communications providers. But growth rates point to where all the networks are going.

It's all based on broadband.

Kindle Fire Has Changed Tablet Market

The Kindle Fire has changed the tablet market.

Up to this point, the issue has been to create a device, and an application ecosystem, to rival the Apple iPad. That still is true, but what is new is that the tablet market now has at least two "lead" devices, including the Apple iPad and the Kindle Fire, each representing a distinct segment within the tablet market.

Granted, some will continue to view the Kindle Fire as a capable "e-book reader," while the Apple iPad is a "real" tablet. Others will continue to argue that niches and segments exist within the tablet category.

But rumored movement by Google to create a "reference" tablet that will compete in the tablet space might take the form of a tablet positioned about the Kindle Fire, not the Apple iPad.

That, at least, is what some component suppliers now believe.

Google executive chairman Eric Schmidt has said the company plans to launch a high quality tablet device "within the next six months."

The sources believe that Google will launch the own-brand tablet in March to April of 2012, featuring a seven-inch panel and Android 4.0 with a price less than $199 to compete against Amazon's Kindle Fire. Google tablet PC believed to be targeting Kindle Fire

Why Do People Use Landline Voice?

From a fixed network service provider perspective, there are some perhaps-worrisome findings in a recent survey by KPMG International of 9,600 consumers in 31 countries, even though the survey also suggests most people have landline voice service.

Some 80 percent of respondents to a global survey say they have landline voice service, which some (including KPMG International) might say that shows the resilience of demand for fixed line voice service.

That isn’t the only logical conclusion, though. The survey also suggests 52 percent have a voice landline because it is necessary to get their Internet connection.

That might suggest that in many cases, purchase of the first product (voice service) is necessary to buy the second product (Internet access). KPMG International survey

Such “product tying” can continue to work so long as consumers have no other alternatives.

But some also would say actual demand for fixed network voice lines cannot be determined with any precision when “sell through” is required. I other words, some people might buy landline voice because they have to, to get Internet access.

Though such tying practices increasingly are rare in many markets, product pricing generally aim to provide incentives to consumers for buying both products, or a triple play, together.

The good news is that lots of customers are rational buyers. They say they buy voice service because it is more reliable than mobile or Internet voice, or because landline is more effective for some applications.

Business users likely can provide better examples of those values than many consumers can do, and it is the business markets where one might argue the value of fixed-line IP telephony is most germane.

The worrisome results could lie in the great number of people who say they buy “out of habit,” since habits can change, or who report that they buy landline voice to get Internet access.

Over the past 12 months, around four percent of respondents to a KPMG International survey seem to have eliminated their landlines but more than 80 percent still believe their landline is important.

Also, globally, more than 80 percent of respondents indicated that they have a landline service, with the highest concentration found in Asia Pacific (83 percent) and the lowest (76 percent) in Europe, the Middle East and Africa (EMEA).

Almost a quarter of all respondents from Europe,the Middle East and Africa have no landline at all, versus 17 percent in Asia Pacific and 22 percentin the Americas.

Many respondents also seem to hang on to their landline for reasons of comfort. Some 45 percent said a landline felt more reliable. This may represent a massive opportunity for operators that can leverage this ‘stickiness’ to launch additional services over landlines that drive new revenue streams and models, KPMG International says.

The KPMG data also found that the propensity to maintain a landline depended on the age of the consumer. Only 72 percent of people aged 16-24 report having a landline, versus about 88 percent of those over 45 years of age.

The survey was conducted in the summer of 2011 and included 9,600 consumers across 31 countries. All surveys were conducted online, except in Nigeria and Saudi Arabia where telephone interviews were conducted. All respondents had to own either a laptop or notebook computer, tablet computer, smart phone or mobile phone.

Social Signals as Polling Data

The graph below compares the NBC poll with positive sentiment on Twitter. The data was collected between Dec. 27 and Dec. 30, 2011. One might note that the surprise finish by Santorum was "predicted" better by Twitter activity than by "scientific" polling.



In research Global Point has done in the past, its data tends to be about two weeks ahead of polls. Social signals and polling

The Twitter "positive" activity indicated that something was going on, that Rick Santorum was fast gaining traction.

4G, Business Access Both Benefit From Growing 10-Mbps Ethernet Trend

By some reasonable accounts, carrier Ethernet has boosted HSPA+ performance enough that it can accurately be described as “4G,” at least in terms of potential bandwidth. That might qualify wireless backhaul using Ethernet as the most-important single carrier Ethernet application, in terms of customer impact.

But a change in business customer bandwidth buying would run a close second. Many would argue that 10 Mb/s Ethernet is the new T-1.

According to Vertical Systems Group, most business buyers choose access speeds someplace between T-1 at 1.5 Mbps, to T-3, at 45 Mbps.

Carrier Ethernet is the most popular technology choice within the intermediate-speed category, Vertical Systems estimates. By 2014, Ethernet connections will exceed all other intermediate-speed options by a factor of about 2.5, Vertical Systems Group also predicts. Carrier Ethernet enables 4G

Kindle Fire Cut Into iPad Sales

As many as two million fewer iPads were sold this holiday season because of Amazon's Kindle Fire tablet, according to Morgan Keegan analyst Tavis McCourt.

That wouldn't strike many people as unexpected. Amazon says it sold more than four million Kindles in December 2011.

Selling at $199, compared to $499 for the lowest priced iPad, the Kindle Fire would be expected to take some "tablet" share, even if some observers would say the Kindle Fire is an e-reader, not a tablet. Kindle Fire Cut Into iPad Sales

McCourt now estimates sales of 13 million iPads in the quarter, down from 16 million, while boosting his projection on iPhone sales to 29 million, from 27 million. He now estimates that the company sold 4.8 million Macs in the quarter, down a hair from his previous projection of 4.9 million. iPad sales down

He estimates the Amazon Kindle Fire sold four million to five million units this holiday season, likely trimming iPad sales by one to two million units.

Is Communications Spending Growing, or Not?

As a practical matter, it often is difficult to ascertain whether consumer or business spending on particular communications services or products, though up or down in nominal terms, actually represent growth or decline. The reason is that nominal increases in spending over time sometimes reflect broader price changes in the whole economy, rather than changes in demand or spending as a percentage of total spending.

Also, even nominal spending can be deceptive. If a flat dollar amount of spending over time also is accompanied by large decreases or increases of overall income, for example, the nominal spending can disguise “real” changes.

Ignore for the moment changes in product value or features over time that also complicate comparisons. If “X” amount of spending on any product also is accompanied by significant changes in a household or national budget, for example, then the implications can be quite significant.

As a percentage of spending, a flat amount automatically will represent a larger percentage of spending.

In other words, the product of a fraction always changes as either the nominator or denominator changes. That noted, it is possible that spending patterns are changing, for the first time in decades. There is evidence that between 2007 and 2010, for example, U.S. households were spending much more on “telephone equipment,” which has to represent purchases of mobile phones. That should, in principle, lead to higher spending on mobile communication services.

There also was a predictable increase in spending on “communication services,” which probably reflects increases in video subscription rates, plus some incremental spending on mobile services for all those mobile devices people seem to be buying.

Keep in mind that those percentage increases might, or might not, represent a significant change in the percentage of household spending on services or devices.

Logic might suggest that most people do not spend much, in any given year, on fixed line phones or fax machines, for example.

So a 16-percent change on a small base might not represent much actual sales volume. A four-percent growth of spending on “information processing” equipment, which presumably includes personal computers, tablets and possibly other personal mobile devices, might represent a bigger change in dollar volume. 

On the other hand, logic also would suggest that people are spending more on tablets and smart phones, which could mean they are maintaining spending on legacy products, and adding new devices (increasing spending overall), substituting new products for older products (substituting new products for older products), or cutting back someplace else in budgets to add the new products. 

Looking back at the 1990 to 2008 period, for example, one can note “huge” increases in nominal consumer spending on communications and information technology.  

Since 1990, though, those changes also  have been more than matched by broader increases in household income, holding the percentage of household spending on communications flat over the entire period.

One might also note that such figures also are not typically “inflation adjusted” to show changes in constant dollar terms.

Since 1990, consumer spending on information and communications technology has grown from $197 billion to $545 billion, 5.1 percent of national disposable income in 1990, peaking at 5.9 percent in 2000, and falling to 5.4 percent in 2008. Those figures include both recurring spending on services and product purchases.

Spending on communications services has tripled over the same period, from $77 billion to $243 billion, and at 2.3 percent of national disposable income, up from 1.8 percent in 1990 but below its peak of 2.5 percent in 2001.

Basically, the story is one of large increases in consumer value. Consumers are spending more on communications and information technology, but a steady percentage of disposable income. Yet consumer value has grown exponentially in the intervening years, one might argue.

The problem is that changes in product quality are not reflected in retail price metrics. That is a common “problem” where we look at software and computing devices, where a constant dollar amount buys more processing power and features every 18 months to 24 months.

U.S. communications expenditures as a share of national disposable income has been flat since 1997, but users have added over 100 million broadband and video connections and over 100 million wireless connections, according to the Bureau of Economic Analysis.

Such potential changes bear watching. It would be a very-big deal indeed if typical consumer spending on communications services and mobile devices were to deviate from their historical patterns in a markedly upward direction.

One might argue we already have seen a slight upward trend, measured as a percentage of total household spending. The other angle is that communications spending always will represent a very-small fraction of overall household spending, dwarfed by housing, food, medical care and other categories, for example.

Ultrabooks, Not Tablets, will be Center Stage at CES

The upcoming Consumer Electronics Show will likely be dominated more by "ultrabooks" than tablets, though some might say "ultrabooks" are the latest iteration of the notebook form factor and user interface, not a "distinct category" of devices.

That's okay. People clearly are getting used to devices that boot up fast, and a slim notebook that boots fast is a definite improvement. Others would note that "ultrabooks" draw inspiration from the Apple Mac Air, and that's okay as well.

Among the advantages tablets demonstrate to most users is that they boot up fast. CES


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People Like Siri, but Don't Use It

By my non-scientific survey of family members who use iPhone 4s, Siri is deemed interesting, but it doesn't get used. I find the same thing to be true of Google's "voice search" on my Androids. I think the speech-to-text function works remarkably well. I enjoy having the feature.

But I typically still type in Google search terms. I can't explain why all of us seem to be using text input where speech input is available. In my case I've had the feature for two years, and never have abandoned text entry when searching.

You might argue that Siri is a better, more natural way to "ask questions," rather than "a way to search." But it doesn't seem to have changed behavior much.